Maximizing the Utilization of AGOA in ECOWAS for Economic Transformation

By George Boateng, Southern Voices Network Scholar August 2016

First signed into law in 2000, the African Growth and Opportunity Act (AGOA) was expanded and reauthorized for ten years in 2015. While many critics question how useful AGOA has been, particularly due to its strict origin requirements on products other than textiles, its impact has been substantial: AGOA has created an estimated 300,000 direct jobs in Sub-Saharan Africa and 120,000 in the United States. Still, it has been vastly underutilized.

In 2014 the United States imported USD $2.3 trillion in goods, of which just over 1 percent came from AGOA countries. The reasons for low utilization are well documented: Sub-Saharan African countries have not widely publicized AGOA at home nor addressed some of the key barriers that prevent their citizens from fully utilizing it. Additionally, many African countries lack the capacity to meet the strict volume and supply requirements imposed by U.S. buyers and are not competitive in exports. Further, the manufacturing sector in Sub-Saharan Africa (SSA) has been sluggish, even stagnant, over the last two decades, with just over 6 percent of all jobs in manufacturing in Africa. An export push is needed to maximize utilization of AGOA.

Beyond the development of AGOA utilization strategies at the national level, regional integration is the key to maximizing the utilization of AGOA. The Economic Community of West African States (ECOWAS) is considered one of the more effective economic blocs in Africa. Appropriate policies and a three-pronged approach are needed to maximize AGOA utilization in ECOWAS through regional integration. First, ECOWAS must move to scale up the integration process and move toward the establishment of a regional industrial hub. Second, it is essential for the U.S. government to continue expanding its Africa strategy and trade capacity-building programs. Third, African governments must move to create a conducive policy environment for export firms to thrive by taking advantage of a rebalancing in Asia away from exports toward a consumption-led economy. The reauthorization of AGOA presents a window of opportunity for Sub-Saharan Africa. There is concern in some quarters that AGOA may not be renewed after 2025, due to a rapidly changing global trade environment, notably the European Union’s preferential trade agreements with African, Caribbean and Pacific (ACP) countries. These agreements provide bilateral access for European firms, unlike AGOA, which only provides preferential access for African goods coming into the United States and not the reverse. With the Trans-Pacific Partnership (TPP) all but ratified, Africa cannot sit around and wait. Sub-Saharan African countries must move to strengthen regional partnerships and increase export-led manufacturing before the 10-year window of opportunity provided by AGOA closes. A call to action is needed to enhance economic reforms and peacebuilding, deepen integration, diversify exports and increase export-led manufacturing, and move goods to more efficient spaces.